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Saturday, December 29, 2012

My six predictions for 2013

US will continue with its policy of quantitative easing –
the US economy will do better than the current 2% GDP growth (expected to be
around 3%) - there will also be mild austerity measures to balance the budget
over long term (a small cut in expenditures and a mild increase in taxes for
the rich) –the US economy and the US dollar will emerge stronger over
the year.

Europe will continue in its difficult process of economic and
political re-integration – the overall EU GDP is expected to grow between 0%
and 0.5% –the European central bank will
continue with its policy of monetary easing – the German elections in 2013 will
not result in change in direction – Greece, Spain and Italy will continue to be in recession.

Asian economies and Latin American economies will
increasingly become more prominent – China and India will do better in 2013
than in 2012. Middle East will continue its transformation and Sub Saharan Africa
will grow further into prominence.

So here are my six
predictions for India for 2013:

Inflation will fall slightly
and RBI will reduce interest rates in the first half of 2013 – this will
result in rise in rise in Sensex between Jan and June 2013.FII inflows would be good (at least till
Q3 2013). In the last quarter of 2013, the govt will go into election mode
and it would result in volatile and directionless markets towards the end
of 2013.

USD/INR ratio will go
from current Rs 55 range to Rs 57 range by end 2103 – the devaluation
will not be more than 5-6% through the year.

Gold will give close to
10% returns in 2013 – it will beat inflation but will not be a great investment
option.

Long term Debt will
give 11-12% returns

Overall corporate
performance would be better in 2013 due to more market friendly policies.
Hence, it would be prudent to look at select stocks – it would be
possible to get 25% returns by investing in quality stocks at the right
price. Industries that I expect to outperform are FMCG, consumer
durables and financial services.

Improving economic
conditions in India would result in real estate doing better in 2013 than
in 2012 – so cities like Bangalore, Kolkata, Mumbai, Surat and Bhopal where
real estate did not perform in 2012, will perform in 2013. Hyderabad real
estate depends on the resolution of Telangana issue. I would urge caution
for real estate investments in Chennai, NCR, Jaipur and Pune as the real
estate market is over heated in these cities.

In all this, there is one joker in the pack – the Iran issue.
This would become a flash point during this year and that can impact the global
markets and it is difficult to predict the scenarios.